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The Heavy Hand of Government Regulation Looms Over Cryptocurrencies - Nathan McDonald (16/01/2018)

From the archives of sprott money news

January 16, 2018

Over the past couple of days, Bitcoin and all other cryptocurrencies enjoyed a much-needed rally. Confidence was building once again and things were appearing to get back on track. The bull market was back on!

That is, until government officials and central banksters had their say.

Let me repeat something that I, and many others, have stated for years: The more successful cryptocurrencies become, the more of a threat they are to the establishment. The financial elite derives the majority of their power from an ability to endlessly print fiat money out of thin air.

This power is undeniably vast, and therefore it comes as no surprise to me that the eye of "Sauron" is now being turned on cryptos. This is a space they have been watching skeptically for some years now. The FED has kept a watchful eye—and so, too, have others.

This watchful eye has turned to “jawboning,” a common tactic used by central banksters the world over. They love this strategy, as it requires getting no blood on their hands. By simply speaking positively—or in this case negatively—about a market, they can send it either soaring or plummeting. We’ve witnessed this strategy countless times before, when they discuss gold, the markets, or interest rates. It just so happens they are now turning their sights on the hottest market any of us have seen in our lifetimes: cryptos.

One of crypto's greatest assets is the fact they are not controlled by any one government; they are largely unregulated and de-centralized. As a result, all kinds of legitimate, dark and grey money flow into this space.

This has made countless millionaires out of small-time investors over the past year, many of whom are likely attempting to dodge the taxman any way they can.

Now, Bitcoin and other cryptos have suffered another major setback, falling 20% overnight due to continued crackdowns from China and increased hostility by South Korea, both of which make up an incredibly large portion of the global market for cryptocurrencies.

South Korea's finance minister, Kim Dong-Yeon, even went as far as to state that a "cryptocurrency exchange shutdown is still an option" —an action that is already having dire consequences for the markets, even though it has not yet played out in actuality.

Central bankers the world over are now stuck between a rock and a hard place.

Do they:

A) regulate and clamp down on cryptocurrencies, sending them once again into the black market, where many will continue to be traded, albeit at short-term lower prices? Or do they:

B) allow cryptocurrencies to be embraced on the open markets, attempting to tax and regulate as much as possible—risking the possibility of cryptos overtaking their fiat money due to Gresham's law

My guess is some countries will fully embrace the crypto space, hoping to become central hubs of trading in this market, as Wall Street and London are for the broader markets. While other countries, fearing the worst, will continue to ratchet up their rhetoric against Bitcoin and every other alt-coin.

However, there is a third scenario—the most sinister and frightening.

C) Central banks, seeing the value in this purely digital currency, will issue their own Frankenstein cryptocurrencies and clamp down on the existing market—moving to a purely digital-based fiat money world, one of their greatest dreams.

Option C is truly the scariest, and this timeline must be resisted at all cost. The power and control this would offer a government is truly absolute. Abuse would be rampant and unjust. In essence, they would own you through their ability to control your flow of money, whenever and however they wish.

Regardless of what unfolds from this point on, 2018 is shaping up to be a roller coaster of a ride—not only for cryptocurrencies, but for gold, silver and the markets as a whole. We are now smack dab in the middle of a once-in-a-lifetime revolutionary change in how markets function and operate.

Strap yourselves in. This is going to be a bumpy one.

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About the Author

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early age, which naturally led him to become a true believer in precious metals and all that they stand for.

Nathan served eight years in the Royal Canadian Navy as an electronics technician, seeing the true state of the world, before starting his first successful business. He has since gone on to create a number of businesses, all of which are still in operation and growing.

In addition to this, Nathan runs a network of successful precious metals blogs, and a growing newsletter that has attracted readers from all around the world. He is a regular and highlighted writer for the highly respected Sprott Money Blog, which covers world events, geopolitics and of course precious metals.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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